>> we have definitely been in somewhat of a rolling recession, but we can all agree we have not been in a labor market recession. >> these kinds of numbers, you question whether they slow down materially at all. >> we see signs that make us worried about the sustainability of the job expansion. >> the only way to do that sustainably is to have a big boom in productivity growth. >> you do not need to have an economic collapse to get the inflation rate lower. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: let's get your trading week started. live from new york city this morning, good morning. for our audience worldwide, this is "bloomberg surveillance" on

tv and radio. your equity market on the s&p slightly negative after nine weeks of gains on the s&p 500. we deliver a week of losses to kick off 2024. cpi later this week, then bank earnings friday. tom: which is more important? the "fte" has a major headline on huge challenges. i will put extra weight on bank earnings. but on inflation, i think there is a massive mystery. what a joy to have lori calvasina coming up with some real optimism. jonathan: i've read note after note after note asking one question. what can go wrong? nothing can go wrong optimism is at risk. lisa: and the risk in the first week was this idea that this over optimism in fed rate cuts that people were foreseeing -- friday was really interesting.

the data was all over the place. we got a report that seemed good on its face, then we got services data that looked weak on its face, and everyone went for the weakness. optimism in rate cuts seems to be -- tom: he thought all in all it was constructive data. but i take your point. i thought data rosenberg was brilliant parsing out what and along was talking about, which is the birth-death adjustment. you adjust to a huge number. like 400,000 jobs disappear from 2023. jonathan: speaking of what can go wrong, what can go wrong when you board a 737 9 max jet? can you imagine being on this flight over the weekend? lisa: i am just grateful that no one was sitting right next to the plug, the 63 pound thing

that blew out. is this a manufacturing problem? a problem -- product problem? how many 737 max 9's will get grounded? tom: and it is incremental. we were talking about this before we went to air, but you go to seattle, chicago, somewhere outside washington, and it has just been this thing, that thing, the placement of the engines relative to the wing and on and on, yet airbus -- and i could be wrong. we will talk to experts on the show today. airbus just continues to move forward. there is a real distinction. jonathan: one of those experts coming up later this hour. as we kick off your morning, here are the scores. starting with the equity market, negative again by one quarter of

1%. kicking off of the week a little bit softer. on the surface of things, payrolls look decent. beneath the surface, some cracks. then the employment index -- lisa: it fell the most and the lowest we have seen going back to the heart of the pandemic in 2020. will we get confirmation of the disinflation narrative thursday? that will be the key economic data point. cpi coming in thursday. we have seen that the client. do we see that continue given some of the pressures people talk about that could reinflate later on? we also get ppi friday. we get a bunch of treasury options this week. i am really focused on this at a time when the u.s. total public debt trading in the system has doubled since 2014. three-year notes tomorrow, 37 billion dollars of 10-year note's wednesday, and $21 billion of 30 year notes

thursday and corporate earnings friday. it should be an interesting, diverse read on where we are. jonathan: loss of data and loss of earnings, coming up. starting the conversation with lori calvasina, the head of u.s. equity strategy at rbc. this jumped out in your most recent note. the beginning of a phase of turbulence. how concerned are you about that? lori: i was talking to one of my traders last weekend we were discussing the cftc data that is looking very stretched. i said, this looks scary. we need to keep in mind sentiment has been oscillating very quickly over the last six months, so this is not necessarily something that has to derail a call for the year, maybe just dampen enthusiasm a bit. but we are starting to see data from institutional line up with retail, and both are looking very stretched right now. there are a number of things

that could come in and trip this market up a bit, but usually it is something the market does not see coming, so we need to focus on the idea sentiment got carried away at the end of last year. tom: mike wilson has been cautious on the market come over at morgan stanley, that nominal growth could be the surprise, one of his more optimistic constructions of the mystery of where we are heading in at 2024. what do mid-caps and small caps do if we get legitimate animal spirit? we get legitimate nominal gdp? lori: what we have typically seen -- and i will look at it in real terms instead of phenomenal. but if you're looking at gdp above 2.6%, and 2.6 percent has been the long-term average since the 1970's, we typically see small caps outperform in that environment. when gdp is running cool, that is when gdp tends to outperform. we have got gdp forecasts

sitting at about 1.3% this year come up from about 1% in november, so they are moving in the right direction. but if we want a lasting, sustainable leadership rotation away from megacap stocks to everything else, you need to see gdp expectations move up quite a bit more from where they are right now. tom: gdp has got to come up, i get that, but what do we do now? are you deploying cash to small caps and mid-caps? lori: i still like them. i do not like them quite as much as i did four or five weeks ago when we last spoke. one of the things we have seen is, in addition to sentiment getting frothy in the broader market, if you look at small-cap positioning on the cftc data, we are at three-year highs but not all-time highs, so we will know soon whether it small caps are able to power through and take things up another leg. we are also seeing small caps

look cheap relative to large, but if you look at the russell 2000 forward pe, it is back to average. that is not usually where things top out at, but it is telling us to be we have made a lot of the easy money in small caps already. do i like them? yes. as much as a month ago? not quite. lisa: this all sounds negative, yet you just updated your forecast to a 51-50, a 10% upside. if it is not small caps, what leads? lori: value stocks in particular or something to keep an eye on. we have seen financials do quite well. we are starting to see some of our favorable views emerge on the industrials as well. we will get interesting clues in this reporting season, but sector composition is tough right now. if you go back to our target, we were anticipating a 10% return. . we put that target out mid-november. we were on the earlier side of putting targets out. we trued up all of our models

for year and -- year end. now we are sitting, even with this update, it is only an 8% return on the year. it is not necessarily getting more bullish, it is chewing our model up. lisa: you mentioned banks. how important is friday going to be as jpmorgan kicks off the earnings, to give a sense of what the landscape is for banks? or is it just jpmorgan's world, and everybody else is living in it? lori: i think they all matter. i do not think it is any one particular bank. some get more attention. what is important for the banks is are these the sort of strong numbers we have seen in performance holding up? sometimes we see the banks give back when they have strong earnings, so are the numbers going to be strong enough to sustain the better trends? but also, for someone like me who is not a specialist in the

financials, we go in and look at the financials for clues on the plumbing of the economy, the health of the consumer. that will probably be the most important thing coming out of the bank earnings. jonathan: the real headline out of the weekend -- a positive surprise in washington, d.c. congressional leaders announcing a deal on topline spending for the current fiscal year. we talked about your line, that talking about politics, the election this year specifically, is like staring at the sun. is it that bad this year for you and the team? lori: yeah, it is pretty awful. that line come from my conversations with u.s.-based investors, who are like, ok, time to write our outlooks. what do we say about this? we walk people through data, get through it quickly, then move on. european and canadian investors, you could easily spend a whole meeting on this. it is like a spectator sport them at this point. but it is a major point of

uncertainty. what was interesting for me is that you are starting to see money flows improve or turn positive to japan, emerging markets, china, and europe. u.s. flows are still holding up, but we are starting to see non-us jogger freeze attract -- geographies attract better flows. that has to do with the election. tom: our question, for rbc clients watching, listening, we started the year with a terrible week -- is there any validity to that emotion? lori: i tend to be skeptical of the seasonal studies -- whenever we do this for this day, we do it the rest of the week -- those studies are being massaged, frankly, to show whatever you want to show. i have been looking at seasonality over the last 10 years. we have had some good ones, we have had stinkers, but we have

seen january has been pretty much a mixed bag. there have been difficult ones, especially over the last five years, so it would be keeping with the recent seasonality to have a rough start to the year. does it tell you you you have to run away for the rest of the year? i do not think so. sentiment has been oscillating so quickly. we were overbought in august, oversold in november, and -- sentiment helps you tactically. i do not think you can use of that much to make a longer term view at this point. jonathan: wonderful to get your views this morning. lori calvasina of rbc capital markets. in the near term, seeing reason for more turbulence for january and potentially beyond. we saw this from j.p. morgan -- stretch positioning, complacent sentiment. not the only ones who think

that. lisa: it seems to be building on this idea that things got overbought in november and december and this is the hangover from that. the key question is ultimately it will come down to the economy, which is the reason earnings will be important. cpi will be important because the data we got friday was confusing. jonathan: and the politics -- is that good news for people? lisa: i am skeptical. headline number, that is where the easy stuff happens. you look under the hood, a more french republicans are criticizing this and saying it is absolutely a nonstarter. democrats are coming out and saying we are not concerned. this is where the details come to play. tom: my take over the weekend, and i am looking at the spx chart here on the bloomberg -- i do look at the standard and poor's, once a year -- coming from 2022, it is up come up, and away, and we had a horrific correction of 1.6%.

the hysterics i find fascinating. i do not have an opinion. bull, bear, that is not our job. but the hysterics on a 1.6% pullback? i am baffled. jonathan: we will talk about the hysterics and washington. remember when china seemingly lost its defense minister? what has happened to the defense secretary in the united states of america? lisa: don't you want to know what it is? jonathan: we do not know. we will try to find out. from new york city, good morning. ♪ you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

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>> we have been negotiating in good faith all through the holidays on the top line numbers. congress has a responsibility. we have the power of the purse, and we have to be good stewards of precious taxpayer resources. we cannot continue to borrow monday to -- borrow money to spend it. jonathan: house speaker mike johnson on cbs yesterday hours before an announcement a deal was reached on topline spending in congress, easing concerns of a looming u.s. government shutdown care that is positive news this morning. here is the broader price action for you. pulling back on the s&p 500, negative by .1%. yields lower a single basis

point. the march towards cbi thursday and earnings from j.p. morgan and bank of america friday. tom: what is the real yield at 1.8% -- it will be interesting to see off cpi where that is into those bank earnings. right to it. the director of policy research at btig joins us now. we had to go with the headline, all clear in congress, we passed a budget. is that true? >> absolutely not. we now have topline agreement from what we can spend for the fiscal year. that is great, it is wonderful. it just means the hard work begins now. there are two points to highlight. you have to notice how angry the far right flank of the house gop is this morning. we need to understand that the speaker, speaker johnson, is operating with no room for

error. if you will almost certainly need democratic support to pass his bill -- he will almost certainly need democratic support to pass his bill. that is something speaker mccarthy did not want to do, had to do, then got thrown out from the speakership. number two is there are so many point of departure between democrats and republicans when it comes to the specifics. there are up to 40 different poison pills, some groups have countered, that could shut down the talks around it. the risk of a shutdown is slightly lower this morning, but there is still a lot of work that needs to be done. tom: what is the primary to do list over the next 11 days? isaac: so what i am looking at is movement on the other issues around the spending the. it is good we got this, and now i think the appropriators will slink back to their offices and you will see some backroom

negotiation and maybe not much than that. i am interested in the border deal. the spending agreement is part of this 3d chess game we have got going on. the other part is the supplemental spending measures. here i am talking about border security and then, of course, funding for taiwan, ukraine, and israel. that is the other part of it. the link to all of that is the border security deal. jonathan: you mentioned the international security concerns. we have to talk of the curious case of the missing defense secretary. first of all, we wish him a speedy recovery. from what? none of us seemed to know. lloyd austin underwent an elective procedure in late december, did not tell his staff they should notify others when he was admitted to walter reed when experiencing extreme pain.

at the same time, his chief of staff fell ill and did not notify anyone. the person we have been speaking to said kathleen hicks was quickly put in charge of running the pentagon, although she was not informed of the reason, and the president, seemingly for days, did not have a clue. what is going on? isaac: this is one of the weirder stories you will come across in the fighting administration, which, by and large, has been pretty tame for these personnel stories, but it is deeply unsettling. i know the secretary is an incredibly private person and this is something that all his staff have highlighted about him, but you do not get to be this private when you are sixth in line in the presidential line of succession. this is deeply unsettling, especially given transparency is one of the pillars of our political system. but ultimately, this, too, shall

pass, and it will remind you of the stories of personnel volatility we saw during the trump administration. this will be one of the campaign trail considerations as well. lisa: you said volatility. do you expect him to step down? isaac: known. depending on health, he will be fine. the president has not made any comments to suggest the defense secretary will leave. i would not be surprised he is replaced if president biden does when reelection, though. this is the type of thing that does not get you reappointed. lisa: this raises a question in general about foreign policy and the platform for president biden going forward. there are a risk -- there are a list of tasks. is he basically going to be running on the anti-trump tended to see once again at a time when trump is consolidating a lot of popular support? isaac: there is obviously -- you have heard that line 1000 times. you campaign in poetry but

govern in prose. i do not think anyone will like the poetry we see from the campaign trail. it will truly be a fear driven campaign, fear of the other side, fear of reversal, fear of retribution. i do not think we will see much hope and excitement coming from the campaign trail. tom: you know the polarity of the states with ohio and ohio wesleyan. absolutely fascinating of the polarity of the iowa caucuses. what is the sense of tension as we begin the political season in iowa? isaac: presidential primaries are about retail politics, and they are about personal preference more so than any national poll could understand. you think about iowa, you got to think about president trump having a 32 point lead. you got the thing about, also -- and this is important -- desantis went all in on iowa. this is it for him.

if you comes in second and loses by 30 points, which the polls are suggesting, pretty hard to imagine him being considered a serious contender going into new hampshire, where he is clearly third, far behind haley. so if he loses as badly as it looks, i think his campaign, which has already been floundering, will effectively be over, and it is a question of how strong nikki haley can look in new hampshire later. jonathan: if he loses and half to drop out, who does he back? where do those votes go? isaac: i think it will be incredibly difficult for him to back anyone. i think he will remain in the background. my bet, though, is those votes split somewhat to haley, and the e for the primary. my point to clients is trump is going to be the nominee. he is the likely nominee. those votes we are trying to figure out where they are going, they are going to him in the general election.

that is the important point here. there are still so many clients and so many in d.c. who do not want trump v. biden, but all indications are it will be trump v. biden. jonathan: thank you. isaac boltanksy there. the politics and the policy. we got to pick up on that point. so much talk of politics, very little around policy. how many conversations have you heard about what the next white house looks like and what kind of policies it will have? lisa: zero. i was looking up some of the policies biden is putting forward, and -- which was basically -- is it going to be this dark miserable campaign of anger and finger-pointing and fake catastrophic talks? that is basically what we heard from isaac boltanksy. tom: but that is american

history. i think a reading of many, but not all, campaigns is bitterness. jfk, going back to alien sedition in 1804. this is the normal kind of process. jonathan: this feels that normal to you? tom: yes. lisa: do you remember clients asking is it going to be jamie dimon versus oprah winfrey, and she had to write it is not going to be jamie dimon? jonathan: this is bloomberg. ♪

jonathan: stocks on the s&p 500 look a little something like this. equity futures negative on the snp. down by .6%. nine weeks of gains in the s&p 500. it was the longest winning streak in -- going back to 2004. the question is whether this rally at year end was surely a year end short squeeze or a sign of the macro fundamentals finally about to improve in a sustainable manner? they data on friday did not speak to the latter. lisa: which is the reason people are looking to cpi. we heard the same kind of talk from lori calvasina.

we saw the nasdaq and the russell 2000 underperform. this idea that it is rate cutting concern and concerns about economic growth. tom: pullback for the first time in nine weeks -- pullback is normal. the hysteria about this is original. it is like we are addicted to up come up, away in my beautiful blue. lisa: am i being hysterical about this? tom: no, i'm not saying you are. is just it is all over, we are going to die, that was the zeitgeist this week. jonathan: i did not see that. -- the fact we have had the first weekly loss since october does not tell you how bad last week was, it tells you how great the last couple of months have been. november, december very powerful. jpmorgan and bank of america coming friday. looking at the bond market, yields lower by a single basis point.

the 10 year, 10.034% -- this tug of war between payrolls looking good on the surface, then beneath the surface, some cracks, then not a great read. lisa: and these people came out and said all the data is funky and you cannot really trust it, so that is why people are looking to cpi. you think you get some clarity, but at tipping points, you don't, so how do you know which data is going to be the important guide to focus on? jonathan: anna wong of bloomberg economics -- more workers able to find jobs, more people taking part-time work for economic reasons -- there are cracks under the surface. tom: there are cracks there, and a really .1 is an underrated gdp. a lot of other people have a

lower statistic. jonathan: the foreign exchange, the euro -- guess what? lisa: what. jonathan: unchanged. going absolutely nowhere. under surveillance this morning, boeing sinking in premarket trading as carriers ground its 737 max 9 jet. eight panel blew off the fuselage of an alaska airlines jet. the plane was forced to land after decompression. no one was injured. the good news is known was sitting in that seat. it could have been very different friday night. lisa: there could have been deaths. there have been deaths in previous accidents of this nature. it raises a lot of questions for boeing, considering they have had other issues. this goes back to 2019 with the max 8, the previous iteration that had problems.

is it going to be a manufacturing problem or something structural that will ground all these planes indefinitely? and how is boeing going to the main competitive versus airbus with this type of cloud hanging over it? tom: someone in the zeitgeist is saying, our people now going to google flights, figure out flight they will take, then see the plane and say, i will not take it? jonathan: i want how close we are to that moment these boeing incidents. tom: i know the planes i love and try to go that way. lisa: i just shut my eyes -- i cannot deal. jonathan: boeing down almost 9%. your next story, congressional leaders announcing a bipartisan deal, hoping to avoid a government shutdown. senate majority leader chuck schumer and speaker mike johnson agreeing to a $1.59 trillion

spending cap, avoiding deadlines set for january 19 and february 2. the good news, maybe the so-called relatively easy part is dealt with, but there is work to be done. lisa: here is the comments from the house freedom caucus -- it is even worse than we thought, this is a total failure. so that is the starting point of the far right republican party. tom: isaac boltanksy said it brilliantly. what we saw on the board, we upped the optimism of that spending cap. full task he said, forget -- boltansky said forget about it. jonathan: did you see the piece out of jpmorgan? a fantastic piece. within that, it talks the trajectory of u.s. debt. every round of fiscal stimulus brings us one step closer to --

we are accustomed to deteriorating u.s. finances with limited consequences. by the early 20 30's, the cbo projects all federal government revenues will be consumed by entitlement payments and interest on the federal debt. at some point between now and then, there may have to be a reckoning. lisa: especially because a lot of the debt we have a short-term. if you look, it is doubled going back to .14 with an accelerating clip. -- if you look, it has doubled going back to 2014 with an accelerating clip. jonathan: over in congress as well, there will be a debate. let's finish on this story. absolutely bizarre. different secretary lloyd austin remains hospitalized but faces criticism after failing to inform the public of his condition. he was sent to intensive care

after complications from surgery. the white house reportedly not aware of austin's condition until thursday. the pentagon not providing details on the procedure. we wish him the best on a speedy recovery, but do not know from what. tom: the pros are aghast. it is just a mess, fumble, by the biden administration. jonathan: the president did not know, and seemingly the deputy to lloyd austin did not know as well. tom: i will take it back to woodrow wilson, but i am sure you can go back to the 19th century, but we need to munication here. certainly a lack of it, to say the least. we get communication now from frankfurt, germany. i am making a joke about what is out there, and that is the dissent of disinflation.

with all these are -- research you have at dzbank, is that european model, the global model, is the glass half-full? >> well, yes. certainly we have had our share of issues over the past few years, and things are looking pretty dire. i do not know if you saw in germany, but we have massive strikes. farms are striking, blocking highways. we have a train strike coming up. it is pretty chaotic here. in terms of our growth outlook, things are not looking rosy. in terms of inflation, it is coming down, but it will take a long time to cover. things are not looking fantastic. jonathan: i did a thing on linked in which have to do with europe and the former prime minister of italy. the basic idea is everyone feels we have sort of gotten there of

a percent unemployment, we have gotten clear of euro sclerosis. what does dz bank say? is germany, and the rest of europe, clear of the plague of decades ago? sonja: i would not say entirely. particularly we think about that freeze. one of the issues we have been having across europe and which caused a major crisis over a year ago -- we are not clear about at all. we have had all these crises. fiscal policy has been loose. i think the structural reforms we so badly needed have not necessarily been done, so there is still a lot of underlying issues, and i do not think they are being tackled. lisa: is the surprise of 2024 for europe going to come from china and whether they can provide some stimulus and accelerate more than people

expect? sonja: if that were to happen, it would indeed be a surprise. china is looking very weak. they have a mountain of problems to deal with. with the debt levels china has reached at this point, it has less ability to counteract weakness. the old method of spend, spend, spend is not really work or china anymore. they have to deal with all these issues. obviously, real estate is hard-hit. you will not get positive growth from china, which is one of the reasons we are looking at moderate, weaksih growth in europe this year. there is not really a source of major acceleration. lisa: given that backdrop, is it plausible the ecb can remain on hold and not cut rates as quickly as the federal reserve, really bolster this that on the euro versus the dollar to start the year? sonja: we all wish the ecb would be able to cut rates, because they rate level, at this point, is very restrictive.

it is hurting consumers, hurting investment, hurting the real estate sector. it is causing considerable pain. from a growth perspective, it would be desirable for it to come down, but the ecb has to look at inflation. and core inflation, super court inflation, all of that remains very high -- super core inflation come all of remains very high. there is no leeway. tom: there is labor unrest in germany. i think there is labor unrest in the united kingdom as well. that speaks to persistent wage inflation, a theme for america, but is that a theme for dz bank that we see persistent wage inflation? sonja: well, i do not know what my week increase will be this year, so i do not know if it is a topic for us at dz bank. but we have had signs, people are asking for more money, understandably. this is what i mentioned before.

the underlying inflation pressures are still very much there, coming from the labor market. we have seen labor unrest, strikes going on, and this will continue. for the ecb to signal it is time for rates to come down already, it is too early and too risky. they may risk of the progress they have already made on the inflation front, even though, from an economic point of view, it would be desirable for rates to come down. jonathan: quickly, to recap, favorite trade for you and the team this year? sonja: i still think short dollar-yen. nothing is happening now with the earthquake, but the boj will have to move on policy, and short dollar-yen is an attractive trait. jonathan: do you have a timeline on that, when they will move? sonja: sooner rather than later. inflation rate in japan as above target, so it will come back towards target, but at the end of this year.

by the middle of the year, they will have to have moved. jonathan: great to catch up. sonja marten of dz bank. looking for that, stronger japanese yen and may be a move from the boj in the middle of the. lisa: wasn't it like -- at least you have a bit more inflation and growth for them to get behind in japan. tom: the union activity in europe i am fascinated by, because it is radically different from over here. it will be interesting, as 2024 unfolds, to see what that wage growth, or lack of wage growth, does. jonathan: the dollar-yen 144.45, moving lower by .1%. one thing not moving lower in a muted fashion is boeing. boeing is down something like a percent, 9%. coming up, george ferguson of bloomberg intelligence on the latest on boeing. tom: it is a huge deal, much

bigger deal than even has been played here. you will get reviewed. lisa will do team coverage in portland, her backyard. sitting out at the barbie. [laughter] jonathan: and raining iphones, apparently. lisa: two of them that they found. tom: not funny. jonathan: imagine how much worse it could have been. absolutely insane. the latest from bloomberg intelligence in a moment. the broader price action on the s&p, negative by 0.1%. from new york, this is bloomberg. ♪

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that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy. >> we look at boeing's process for manufacturing this aircraft, at this stage of investigation, everything is in. we go very broad. nothing is excluded. it is pretty early on, but we do

not exclude anything at this point of the investigation. jonathan: the chair of the national transportation safety board there. the faa temporarily grounding the max 9 for safety checks after a few to large -- fuselage section blew out during an alaskan airlines flight. situations like this are a reminder we must remain focused on continuing to improve every day. fortunately, no one was seriously injured. stock down summer between 8% and 9%. tom: when in doubt, talk to an expert. on the titanic, there were rivets, and the rivets failed. on a 747, there are maybe one million rivets. 737, still in the ancient times of peace and metal together. whatever it is, george ferguson is an expert on this, on rivets

and the lack thereof this weekend. was this a mechanical failure? george: i think this was a failure of fasteners. i think the fasteners were lacking, is my guest. obviously i am looking at this from 50,000 feet, but we are not finding plugs blowing out of other aircraft, we are not finding them blowing out of other -9's. the piece that fell away, the cleanness of what fell away from the airplane, it looks like someone on the production line did not install all of the fasteners that needed to be installed. tom: are the fasteners -- i am an amateur, i will call them rivets -- are the fasteners the same and ubiquitous throughout all of boeing and, for that matter, airbus? george: they will obviously come from a lot of different manufacturers, but i think they will be very similar.

and again, i think this is probably a process issue. i think someone just did not install the fasteners or did not install all of them, and i think it probably leads back to the manufacturers of the fuselage, which has had problems. jonathan: spirit aerosystems, for those unfamiliar with the company, how do they fit in here? george: spirit aerosystems, out of wichita, makes the majority of the boeing 737 fuselage. they make all of them. they were once part of boeing, spun out a couple decades ago now. spirit has had some challenges, like the vertical stabilizer fastening issue, rear pressure bulkhead issues. that has been a lot of turnover at that company. with the pandemic, a lot of people left aerospace, thinking why do they want to be in this business after they watched mobile air travel go almost to 0.

the reasoning up of that workforce has had major challenges. the u.s. job market is pretty hot, and i think, given the turnover, the training required in aerospace, the big attention to detail, i think it has been hard for spirit to get things moving again down there, and i think that is what we will spend a lot of time looking at. spirit is certainly the number one concern for boeing. lisa: were they involved with that 2019 max 8 issues? george: you are talking about the two crashes of boeing? mcas is more of a boeing systems issue. they are very much just in the manufacturing portion of this business. but again, i would come back to, keyed to the boeing recovery -- key to the boeing recovery is

growth and delivery of 737's. we were starting to see that as the year ended in 2023. but spirit is integral to that effort, that recovery. if boeing does not things stabilized at spirit, where spirit is delivering quality fuselages all the time, in the correct numbers, the recovery is going to -- be hard to keep momentum behind. lisa: is spirit the cheapest option for boeing, and that is the reason spirit -- boeing is sticking with that company, regardless of potential production fall? -- flaw? george: no. there was an agreement written in, went spirit was spun out of boeing, that will -- that they would be the primary builder of the fuselage while there is a 737. spirit probably is not the lowest-cost provider. the are probably some that are

overseas, but again, the u.s. has had real challenges. we have gone through the pandemic. workforce turnover has been large, probably larger than we have seen than in the european airspace industry. i think spirit management really has to get down there and -- on training and double down on oversight on the line, because to me, it appears to be a problem on the line. jonathan: there are airlines waiting for delivery from boeing and hoping for a wrap up in production. how likely is that anytime soon? george: we will have to see how this investigation evolves. to me, it seems like an anomaly. it is not a terribly difficult instruction process to take place. most of them are in the u.s.

united is the majority. i think they will probably get their arms around this issue pretty quickly. i do think it will lead to some delays. i do not think it will lead to significant delays at this point. boeing can probably get the production they want this year, provided nothing else happens. tom: what is the airbus-boeing distinction? i think the zeitgeist is airbus has a lot of economics, it is smoother, creamier in the cockpit, and boeing's two engines moving forward. what is the airbus-boeing distinction from an engineering standpoint? george: i think you are right. the airbus cockpit is probably built more around the pilot or built around the computer where boeing is built, perhaps, a little more around the pilot and the pilot's skills. the zeitgeist right now, i don't know.

when i think of these two companies, airbus is doing a much better job of executing. the airbus supply chain has challenges, but it appears they are more on top of those challenges, and they are getting more quality to their lines and through their lines, and that is allowing them to build more airplanes, and they are taking market share here. right now, airbus looks like quality, boeing looks like challenges. the real big challenge is if you are a fleet manager and you want an airplane, you could get in the back of the line for the a320, which is six or seven years long, or you get in the back of the boeing line and before five years out. the airlines are not necessarily taking the planes soon, but there are not a lot of other settlers in town, if you will. lisa: quickly, based on what you said, if this is a problem with

the workforce and some of the disruptions from covid, does that mean post-covid air travel is a whole lot less safe? george: i will say we have had our challenges coming out of the pandemic as we brought the workforce -- the workforce got depleted, and we had to rejuvenate the workforce. that is a challenge. when you have new people in the industry learning their jobs, you're just not going to have the same level of safety, the same level of skill you had prior to the pandemic. jonathan: that is worrying. george: i still travel, though, so i still think it is a really safe system, but probably not as safe as pre-pandemic. jonathan: george ferguson, thank you very much. to give you an update, spirit aerosystems, not to be confused with spirit airlines, is down by more than 18% in the premarket. boeing is down by more than 8%. lisa: that is really alarming. not as safe as it was

pre-pandemic. that is not really comforting. i used to get very nervous before i flew as a little kid. and all the stories coming out now -- it is still very safe, you can fly -- they are coming out for a reason, given some of these accidents. tom: i got lucky. i was in the fancy seats one time -- jonathan: just once -- tom: and i turned around and looked back and there was a woman on the ceiling of the airplane. when i saw that, it was like, ok. jonathan: how many tangs in were you? [laughter] tom: i was deep in the tangs. i turned back and there was a woman on the ceiling. wear your seatbelt. jonathan: amazing. tom: wear your seatbelt is the answer. [laughter] lisa: please. jonathan: don't consume those beverages on the plane -- lisa: there was a woman on the ceiling. ♪

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>> we can all agree that we have not been in a labor market recession. >> you really have to question whether the economy is slowing down at all. >> we are seeing signs of concerns that makes us write about the sustainability. >> the only way to do it sustainably is to have a boom in productivity growth. >> this is bloomberg surveillance of tom keene, jonathan ferro and lisa

abramowicz. jonathan: good morning. alongside tom keene and lisa abramowicz. following the first weekly loss on the s&p 500 going back to october. earnings for the big banks, kicking off friday. tom: for the banks it will be a view measurement of the economy. on the inflation side, i found a very mixed. the first thing i did today was to look at the screen and i would call it a jungle this week. this jonathan: we continue to project a soft landing for the labor market. will the data that we get this week speak to that?

lisa: we are talking about what could go wrong after really messy data on friday. the number of takes that i read -- what that said about the economy ranged from you have to trust headline number to all of this data is messy and you cannot trust anything. they were each picking out their own quadrant to focus on. jonathan: what could go wrong? sounds -- in our view, rate cut is disappointed. that is what can go wrong. tom: it is out there. someone was over bullish or over cautionary. john, you devolve from double debit -- double-digit omg to

over the moon returns and single-digit returns. how boring. how boring. it is a monday. jonathan: -- tom: it is a monday. jonathan: ok. negative by 0.1%. tracking lower. more to come on that a little bit later. lisa: we will also hear about why you should wear a seatbelt. first one, cpi coming. how much it really does drip back down to that soft landing narrative. i will throw another narrative into the mix. we have treasury options and we are talking about the question of the rising issuance.

outstanding public debt from the u.s. government has risen. you have three year, 10 year and thirty-year notes being auctioned this week. to me, that will be telling. jp morgan kicking off all of that. bank of america also reporting that day. over the past year, jp morgan with shares of 25%. that is the disparity that we are talking about. jonathan: the distinction for that story, very different. shannon, wonderful to hear from you and catch up in the new year. we have talked a lot about companies but talked very little about europe. why is the team so constructive

on the year ahead? >> i agree with what you said for her. we had a good year last year. it is overshadowed by the big tech stocks in the u.s. doing incredibly well, but europe, more than 20% last year. but if you look at something more narrow europe had a great year last year. talking about earnings as well. valuation is not that expensive. 12, 12 .5. not expensive, good earnings, not a bad place to be. tom: if i go back to the beginning, early january 2020, basically the u.s. has done a double off of europe, up 11% or so. great. now, forward.

people in europe, our goldman sachs clients in europe insisting that they need american tech? >> that is a good question. generally speaking, what you cannot get in europe or what you find tricky to get is good, strong growth. what you can get is cheap evaluations. you can get some modest growth stocks as well, but high-growth is much more difficult to get in europe. there is always going to be a big global investor. big, liquid companies that can give you that reach. the other criticism that i have of europe at the moment is, it is more exposed to china than the u.s. is. so a lot of it has been china driven.

tom: what does the german slowdown, the overall german economic challenge have to stock 600 investment? >> i am probably a little less worried about that than china. it is global trade growth coming down. china's domestic demand has weekend so it is the same type of issue. it grows based on exporting to china and cheap energy. now neither of those things are in place. massive industry for the stock market and the economy being hit by that move. absolutely, i think germany has some problems, but if you look at the geographical sales, sales , exposure to germany is not that big. the biggest is actually the u.s.

, three times the size of germany. so yes, i think germany is flatlining at venice but it does not matter as much for overall european demand, as people think. lisa: especially -- this is a question if the magnificent seven of europe look different than the magnificent seven in the u.s. and i'm talking to some degree airbus. >> totally, or commodities companies dependent on global demand. i think this sort of exposure is not zero. i cannot deny that. you are more exposed to that than other regions. but other regions have their reasons as well. obviously, asia is much more

exposed to that in europe. europe has its problems with it trading even lower than that. it is reasonably well priced as well. lisa: you mentioned something with european banks. i'm wondering if the ecb is going to be cutting rates, is that a good thing or a bad thing for financials? >> i was very convinced by european banks last year. we downgraded right at the end of the year to a neutral. i would not be worried about european banks. i see it as a neutral. we do see the ecb cutting rates quite consistently. the bank of england as well, cutting rates from may. they are probably on balance, but equally, we think growth will be ok.

i think that interest rates will be higher at the end of this cycle than they were at the end of last cycle, so i do not feel the backdrop is that bad. they are buying back shares and dividends. they are very good cash flows at the moment. jonathan: is there an underlying currency call that you are making alongside this? >> it is interesting. europe often does quite well with euro rises. it sounds because european companies are glibly exposed. if the euro is rising, that could -- that should make it more tricky them up of the year of rising is normally a good signal that europe is not about to break up. so, we do have the euro rising and we had it rising to about

112. it is 109 at the moment. so a rise in the euro. i think we are about 127 at the moment. but this, that reflects the fact that global growth will be ok. we think u.s. interest rates are also peeking and we will see rates from march onwards. it is a recipe to a slightly weaker dollar. jonathan: looking for high single digit gains. european equities this year. tom: i look at the european index and the standard 500. there is, in-your-face, the tech distinction of america. nestle -- that is techie. they are daily, like number 10.

it is completely different than the tech dominance. jonathan: really expressing the fx market as well. 127 on the pound against the dollar and looking for a 12 and 135 respectively this year. lisa: because of the growth in the region, it will foster better earnings calls. european banks had their best year ever versus u.s. banks last year. what is undervalued or overvalued? jonathan: the bank of america was really under the microscope. tom: we will be under the microscope, including this week when we see j.p. morgan. jonathan: welcome to the program. equities futures, yields moving a little bit higher by a single basis point. the next stop for this bond

market, i on thursday. continuing to speak to that disinflationary trend. rate cuts sooner rather than later. tom: i look at the annualized and some of the compendiums of what you look at, whatever way you play with the numbers, the fact that disinflation is in order. my question is how do you get flatness? what is the timeline? that, to me is the mystery. how long does it take to get there? that is a complete mystery. jonathan: talking about we praise -- we pricing rates higher. jim has a very similar view on all of that, repricing rates

higher. it could be a big risk in the year ahead. coming up next, bloomberg and the middle east. we will talk about tensions in just a moment. equity futures shaping up like follows. the are just about negative. let us call it unchanged. higher by a single basis point. 4.06% on a u.s. 10 year yield. from new york, good morning. ♪

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>> we reject the statements. these statements are inflammatory and only make it harder. with hamas no longer in control and terrorist groups no longer to threaten security. jonathan: that was intimate blinken. the latest tour, wondering if the conflict could easily spread. we will pick up on that in a moment. it looks a little bit like this on the s&p 500, going absolutely nowhere.

crude at various times threatened to break out. becky down by 3%. tom: we have not said enough about this. i'm still thunderstruck and u.s. has brought on a lot of supply. jonathan: 13 million barrels a day. tom: we are going to digress at the beginning. bobby joins us from bloomberg opinion as well. going back to 1919, he is blind in his left eye and has had the major strokes after a history of stroke. woodrow wilson was fragile. and set up an architecture of identification of ill people at the senior level. should we be in an uproar if the

secretary of defense was ill over the last couple of days? >> the president did not know about it for four days. we are in a situation where there are two raging wars with strong u.s. interests. isis is active again. there are crises after crises, after crises. the president of the u.s. did not know that his secretary of defense was out of pocket. there are political is designed to stop something from that happening. they broke down, something more serious than apology from the defense secretary. tom: i think it will focus on pennsylvania avenue. what should be the response of the white house? >> the white house should demand something more substantiative

than an apology and the president has to figure out whether he is satisfied with the answer that he gets from the secretary about my he was incommunicado for so long. or why the right was not told this. it seems like a basic and simple mistake to make. this happened in major corporations, heads would roll. jonathan: there was a terrorist attack in man. what was the communication between the white house and the pentagon at that time? should they have found out where the defense secretary was at that point? >> they should have. jonathan: what happened? did no one talk to each other when that happened? >> it seems like the deputy was responding to queries. we have been told that the secretary's assistant was themselves in bed with the flu.

this is where all the communications broke down. that does not strike me as a satisfactory answer that if one person has the flu -- that cannot be right, not in this day and age. lisa: there has been outrage from both sides of the aisle in order to get more information. you mentioned two raging wars. one of them, we started the segment with antony blinken talking about a profound moment of tension, a moment that could eat it -- easily metastasize and cause more suffering. we are hearing more news about strikes by israel against hezbollah in lebanon. is this de-escalation that antony blinken was talking about? >> this is a bigger step by the israelis than the assassination of the hamas leader in beirut,

last week. this is a hezbollah leader. when the hamas leader was killed, hezbollah had a degree of separation. they could -- and private they could say, this is not our guy that was killed and we do not have to respond ferociously. when their own guy is killed, it will be much harder for them to justify anything short of a major response. the potential for escalation is really great. lisa: the role of some of the u.s. warships. people were talking about this as trying to strike back or deter hezbollah. is it to deter everyone from doing anything? what is the actual role of troops that are stationed about what the u.s. role should be?

>> they do not want to get involved in any fighting. but when it fails, what happens? there is this old cliche that if there is a gun on the mantelpiece in the first act, than by the third act, that gun has to be fired. that is what i worry about taking place here. if we learned anything from the history of the u.s. in the middle east, the law of unintended consequences is not our friend. jonathan: we have not spoken since they had to go through the southern tip of south africa. do you see that being resolved anytime soon? >> we have gotten a coalition together. there is a flotilla of ships in the red sea. they have been issued with a warning, but they are disregarding it.

they issued an ultimatum. what are you prepared to do? shipping companies, i do not blame them for taking the zero risk policy. they have enormous amounts of money at stake, people at stake, ships at stake. i understand why they do not want to go into those waters. i can see why they would want to continue firing off their missiles because they have not paid the price. at what point do they have to pay the price? tom: we used to keep careful count of how many people were in iraq. there is a fabulous chart showing the many pockets of americans across the middle east. i was caught by how many it sums up to. do we have a lot of american

military in the middle east? >> we just react our deal with qatar to maintain the american-based there. that might be the most important piece of this complex network. we still have troops in iraq and they are coming under constant attack by militias associated with iran. just last week of the u.s. took out the leaders -- the leader of one of the militias. it might seem like the iraq war is way behind us in the rearview mirror, but the fact is on the ground for the american soldiers who were there, not so much. jonathan: going back to the disappearing act of the defense secretary of the u.s. lisa, you can move on from this, i get that. but it is not like it is quiet.

it is anything but. lisa: is the white house going to hold secretary of defense responsible for violating chain of command and giving the white house a heads up about the shift in leadership? jonathan: i'm just wondering who spoke to who? was there no conversation between the white house and defense secretary when those things were happening? tom: i agree. it is about the history of america. we have a constitutional amendment on this. we need healthy people at the top. it's ♪ easier? choose payroll compliance without the ups and downs. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative

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jonathan: we are coming off the last weekly. the bulls in the market has been absolutely spoiled. kicking off 2024. slightly negative on the s&p 500, down 0.04%. the nasdaq is trying to rally come up by 0.07%. tonnage of the market, the 30 year. up a bully -- up a bully -- update basis point partita bmo. almost 4.40. we talked about that tug-of-war on friday. pay rules look pretty decent and then literally 19 minutes rated

we got the services, and that did not look good at all. lisa: rising back into a rate cut after basically pricing it out. a 50-50 chance. here is the question. what data do you trust and is there a signal for the messiness that we are at a turning point, but we do not know where we are? is this a slowdown? jonathan: it felt that way, but we do not know. the two year yield, just to pick out one security, that note, totally unchanged at the close on writing after all of that information. tom: i looked at the close and i saw this name thing as well. i think people do not have a clue here. it is as basic as clipping a coupon or do the total return after what we saw in 2023.

that is a tougher question. jonathan: 109 what he one. tom: the fx coverage on surveillance. jonathan: they are calling on darling, ultimately, they are looking for a better global back and off of that, a weaker dollar. lisa: i love these exciting calls. crazy. jonathan: enough with that. there is some -- when there is some price action, we will bring it to you. care use around the world ground after a panel flew off on friday. u.s. officials finding a key piece of evidence in the investigation, locating the panel in the backyard of a

portland-based feature. no one was hurt after all of this. it was absolutely amazing. lisa: it fell from the eye into some guy's backyard and nobody got hurt. it blew off of a plane. to your point, this is lucky. it is an absurd point where you have to wonder what went wrong and how endemic is this to certain billing planes -- boeing planes. tom: if i am at united airlines today, you have -- not today but over the next week, you have to check every fastener around every window on every plane. lisa kline tighten every fastener? tom: how can you do anything but

that? jonathan: you mentioned united but there are a lot of airlines waiting on deliveries from boeing, hoping that they would ramp up production. is that going to happen after this? tom: wow. that is all that can be said. jonathan: we all care. we all care, tom, about what you think. on the top line spending level for the current year, the chances of a partial government shutdown ater this week. -- later this week. an issue could still cause an impasse. i think it was a positive surprise. as most guests have told us, do not get too carried away. lisa: the freedom caucus called it a disaster. they do not like it.

republicans are trying to work themselves out. how do you get something passed? do we really work this through in less than two weeks? tom: the answer is, it is going to come back to the linkage of word funding with the migrant debate and the border. jonathan: let's talk about one of those foreign wars. anthony blinken morning that it could turn into a middle east conflict. making his remarks in qatar and other stops in the region. >> this is a moment of profound tension in the region. it is a conflict that could easily metastasize, causing even more insecurity and suffering. jonathan: he is set to travel to saudi arabia, israel and the west bank. lisa: you wonder what their relationship is with israel, at a time where israel is attacking

hezbollah more directly. at a certain point, the u.s. cannot not get involved because ships are getting rebounded and you have these direct attacks of personnel and back, and foreign bases. what is the tipping point at a point when the government is mired in this pretty significantly? tom: where is the pushback? where are we offensively going after people? i do not think that we are. jonathan klein given how delicate the moment is, the story sounds more and more bizarre. tom: i agree that it is unraveling. we are going to unravel to the bond market. the chief investment strategist here. i love where you say that everything considered, there is a strategic bion bonds for 2024.

what flavor of bills, notes and bonds is the best strategic by? >> most investment horizon is long-term. when you asked whether it will be an alpha environment -- it will be both. that is what we saw last year and i think that is what we will see this year. by the time you got to the end of the year, it was up a handful of percentage points. there was a lot of opportunity in between. that was the lesson. you have to buckle up and keep the seatbelt on tight and see what is going on out there. inflation is slashing down. things that pushed inflation up a second time, rising energy prices -- part of that was a war.

we are going into a thing that did not feature in the fed minute, not one time. we're are heading into that. you have energy prices going up and tension in the middle east. that is a formula for something that could in the way. i think that is something that we could get into. tom: are you bringing duration in? >> we will be at times long and short. we have had a spectacular rally. they extended the expectations scenario, which could come toeeg some conn as investors second-guess whether they will get be of percentage points and rate cuts. what we saw on payroll numbers

is derivative of the trajectory. not accelerating, not decelerating -- growing. the fed has a single variable that will drive that decision of cutting rates were not at this point. that is inflation. does it stay down? in that case, they can slowly start cutting rate. other cases it is more complicated. looking at both growth and inflation. lisa: are you looking at oil prices to determine whether to go along or short? >> i think valuations are the critical thing. and the risk factor. when you get cuts priced in while the economy is growing, based on inflation being low, inflation could be very volatile. reality on the ground -- we have

a situation in the middle east and we are going into winter with energy prices volatile. if it changes where we had a low target inflation meetings, that will slow down the fed because their motif of the cycle is not do what they did in the 1970's, which was assume when you are coming down the first peak that the war was over. i think it will be a tactical environment. i think we are in the middle of the range right now but the potential is there in both direction. lisa: we were talking about the overhang of debt and the proportion of the budget. how much are you watching? >> that is the question people asked at the end of 2017. people began to assume that

trump would not get stimulus passed. growth was rebounding. we had two stimulus packages passed and a surge in interest rate. so she is already marketing these extensions of tax cuts. unless that gets stomped out early on, but i think that is another we'll variable out there for the margins in this trading range. pushing rates up or down, making it a great trading market. jonathan: you are part of the market. is there a point where you think, i do not want to buy treasuries? how does this work? >> i think that number one, as

tom mentioned, the fed is done raising rates for all practical purposes, as are the other major central banks. we put out a quarterly last week. we are past the peak and interest rates. investors, as you can see, do not want to miss out on this time. once you have a big cycle, people want to wait for the next round of it. as we rounded out the end of september into october. i think this will be a market where you earn the yield and you want to trade the range on duration, on spreads. but at the end of the day, you went to think, this has been a great period in the bond market. jonathan: robert is here for fixed income. lisa, how will you look at the bond market in five years, looking five years back?

lisa: this is part of the reason why. look back at history and in the to be months before the fed started cutting rate in each subsequent cycle, every single time, we saw yields coming in and bonds valley. jonathan: if you are just joining us, welcome to the program. only slightly negative here. an update on the bond market. yields up by a single basis point. i mentioned this note a little earlier this morning. on the boiling frond that might be an issue in washington dc. 2030 is not that far away. tom: that is the key point. the timeline is tangible.

a comparison of our glide path. jonathan: look out for that conversation about what he five minutes from now. kicking off 2024 with a week of losses. this is bloomberg. ♪

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we are only focused on this investigation, this airplane. nothing is out. jonathan: the latest from the faa, temporarily grounding the plane after a fuselage section blew out. alaska and united airlines are the biggest operators. alaska air is down by almost 6%. still down by almost 8%. tom: we will see. i wonder where the airline business is headed for. the shop is there intangible, but they have struggled to rebound off of covid.

it will be fascinating. it is a good place to start. very good, particularly on kansas manufacturing. senior research analyst joins us. we are thrilled that she could be here with us today. the others are lined up. what is the urgency to act, not so much off the bowling accident but the urgency to act because of the topsy-turvy markets they are in? >> i think that we have the situation where we are expecting or resolve fourth-quarter traffic was pretty good. the further we get away from 2020, the more people see managed corporate travel coming back. i think the trip where you have may be a one-day trip is not

coming back any time soon. it is a lot like after 9/11, where they are short whole trips, one way. we expect that to continue. the longer haul trips, people need to get out and see their client. we are seeing that increase and we think that will continue for the rest of this year. tom: with the rivets and fasteners of that analysis, what does it mean for the dynamic? you know it is going out and buying a bright and shiny new thing. is that accelerated? >> yes and no. america did it in the last decade, so they are on the downside of that.

united is doing it now. delta is in the middle of it. they spent about 10% revenue on cutbacks every year, so they are continually receding. i do not think anything changes. i know it makes up 2% of total transportation carbon, but others are doing the whole thing fantastic, so aviation over time is a big part of it. lisa: i cannot get over this. words you do not want to hear. it is not as safe as it was before the pandemic, talking about the safety of flying at a

point when we had this in with alaska airlines and the incident in japan. questions around the competency and staffing levels of some of the agencies. you concerned? do you feel it is not as safe to fly today as it was pre-pandemic? >> no. the fact that there were no casualties on the japan plane is hugely significant. they were able to evacuate the entire aircraft. there was no incident with having the emergency doors being unusable because of a fire. that is one thing to consider. every time there is an incident, there is an investigation. there is no cover up. you do not see that as you would other industries.

the really have not been any major accidents. the fact that alaska air's pilots were able to declare an emergency turn around land safely with no injuries is hugely significant. aviation trains for every accident. i think aviation is still very safe. lisa: a lot of people point at what happened in japan and point at the plane that everybody was able to get out of, which i think was an airbus. what about some of the air traffic control issues? how important is it for airlines to do some sort of pr job, if nothing else to assuage the concerns of neurotic people like myself. >> i think you have to think

that aviation is safe, number one. number two, we do need to address the situation. that is another thing that we do favorably. the faa is certified. the government needs to step up its efforts. my views are different. i think the government should be responsible and i think air traffic control should be a separate corporation. right now, general aviation do not pay for using the system. tom: i wish we had another hour to cover this. years ago, how different is our transportation safety structure

versus other major developing countries? >> eurocontrol runs europe. that is a public company. canada has a company in canada. it is just one differently. i'm not saying it is better or worse. i'm just saying that it is different. you do not have what you have here. i've been talking about next gen and we are still talking about it. it is years over schedule and over budget. they fired all the air traffic controllers and then we train them. they are overworked, fatigued, we do not have enough of them to handle what we are doing right now. we will see growth through replacing aircraft.

we do not think we will see the pilot hiring in 2024 that we saw in 2021 through 2023. from that perspective, as we move further into the decade, we are not going to grow as fast as we grow in prior decades because we do not have the experience. we cannot push the air traffic controllers into too much overtime because it is a taxing job to begin with and we do not want any accidents to occur in the u.s. because we want to continue to be able to say that it is a safe form of transportation. the difference -- united will continue to do well but they

have a $60 billion program between now and 2032. delta's is not as big, see will not see the stress and the balance sheet that you might at united. jonathan: thank you very much. tom: united 72% debt. i did not know that. she is great. every time, im -- i am wowed by her. jonathan: you can see the underperformance of the airline around this jet that we have been discussing. lisa: the others are eating out gains. jonathan: more to come on this market. cpi data is coming on thursday. jim beyonca is -- bianco is up

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>> when you look at where the fed is right now, there really is not that consensus for a march rate cut. >> the fed is going to cut this year. what is important is that those cuts are likely to happen around midyear. >> i do think the fed is a

little frustrated by the fact the market always must be more dovish than the fed wants. >> the fed is clearly done and how much they will raise rates. >> they are a long way away from the reconsideration of rate hikes, but it is not totally out of the realm of possibility. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. on to inflation. a world turned upside down in moments. james bianco will join us. a fleet -- if we get a bianco market -- yield will go higher. jonathan: let's start this morning with a question from mike wilson of morgan stanley -- whether this rally was a year and short squeeze or a sign that the macro fundamentals will finally improve in a sustainable

manner. the data friday did not speak to that re-acceleration. tom: i thought the mike wilson note was exceptionally cute. he lays out three's different scenarios out there. there was huge uncertainty within the wilson note, so i have to go back to earnings, and that goes back to j.p. morgan friday. jonathan: and bank of america. trying to get a forward look from the recent data. payrolls get all of the headlines. the services sim that came out 19 minutes later really whips up this market. if you look under the surface, the biggest contraction since 2020. payrolls look right at the surface. beneath the surface, some cracks. you go into the ism, and certain aspect look -- tom: we are talking fancy, economic macro babble, and the

fact is some of the statistics show america flat on its back. lisa: it is a complicated topic. we are in a pandemic economy, post-pandemic economy. it is a complicated moment, which is the reason robert tipp was talking about a trading range. it does not lend itself to an overriding thesis as much as trying to understand where the balance of risks are. tom: or the data dependency. the basic idea to me is the arc of what the earnings season will bring, and there is some tangible enthusiasm about earnings. there is some legit dues he has him that the gloom is too gloomy. lisa: some of the m&a cannot rollover and the ipo's, in particular for the banking sector. this will be the key point. lori calvasina of rbc was talking about this earlier, that ultimately, it will all come down to the earnings. tom: we got some headlines

coming out. these are important. this is george ferguson at bloomberg intelligence giving us wisdom on spirit. they will share further information on protocols with regulatory authorities. spirit aerosystems is front and center in this burgeoning investigation. jonathan: not to be confused with spirit airlines. that is spirit aerosystems. boeing is down something like 8% this morning. lisa: this comes after they had other issues in 2019, crassus that did actually result in people getting injured. but people focusing on this, to understand going forward, what does this mean for boeing, what does it mean for airlines depending on it, including united? tom: it is our interview of the day. jim bianco of beyonca research -- bianco research that we will

see some form of leveling in inflation and, with that, higher interest rates. the call is extraordinary, and now people are really beginning to pay attention. put a when on it. what is the timeline you perceive to get the shock of higher interest rates? jim: let's start with inflation. you could make the case that they year over year inflation level bottomed in june. probably later this week when we get the december number, it will go to 2.2, 2.3. that would essentially be it. if it starts trending higher, i think you start to see interest rates respond in time, because what they have priced in is this idea we are on our way to 2%, we are just quibbling about when we will get there, not if we are going to get there. if we are starting to go the

other way, i think yields start going higher. it does not necessarily mean the fed has to go higher, but the idea the market has six cuts priced in -- tom: when the ambiguity of higher interest rates, does that come with better gdp or worse gdp? jim: i think it comes with better gdp, and i think that is part of the issue here. 2023 has not quite got in the record books yet, but it looks like a 2.5% to 3% year is the trend growth. if you look at the atlanta fed, and it is as good as any other measure, about a 2.5% fourth-quarter after a 4.9% third-quarter. we slowed from the third quarter to the fourth quarter from way above trend to trend or slightly above trend, so there is no soft landing in this economy right now. that is kind of wishful thinking.

the employment report friday really underscored that. it is not an outright boom now but it is not a soft landing -- jonathan: let's get into the data on friday. it looks strong on the surface, but underneath the surface, this from and along, more people taking a part-time work for economic reasons, a decline in working hours. the ism was dreadful. are we not putting enough weight on the december data? jim: two things. first of all, we have to be careful with december-january. a lot of seasonal fact is, at the end of the year that skew those numbers a lot. secondly, what we also have to look at is whether or not the nature of work has changed. i've been here many times talking we are in a remote work world right now, where people go into the office three or four days a week, no longer for five days a week. that changed a lot about the

outlook of work and really what we might be seeing, like with the increase in part-time jobs, is the nature of work is changing as opposed to that it is a sign, necessarily, of weakness. you do not see it in other numbers, like the initial claims number. that is typically a number associated with a very long -- very strong labor economy. lisa: so you're saying yield could go up, could go down come you could end up in this trading range. how important is cpi thursday to indicate whether the -- this really noisy data or whether this is showing weakness? jim: it is important, because this month, we should have a small drag from gasoline prices. in november, there was a tremendous drop in gasoline prices, which is why the number was just 1/10. but now that we do not have quite the drag in gasoline

prices in december, we can get a true idea of what the underlying trend of inflation is without the noise of gas. i think what we will find is that underlying trend might be close to where we are over a year-to-year basis, somewhere around 3%. we are still in 4% year-over-year on core inflation as well. lisa: jon was mentioning the budget deficit, a looming question over the inflation discussion. we were talking about this report, talking jpmorgan, that shows much -- most of the tax revenues the u.s. brings in will go to entitlement payments. that was based on an assumption 10-year treasury yield would be around 3.3% in 2033. d think that kind of projection is realistic, or are we looking at a 4% world for the foreseeable future? jim: i think we are looking at higher rates. we are in a trendingly higher

environment for the next several years. we could have a slowdown in the economy and a two or three year rally in the middle of it, but we got to start thinking about interest rates trending north as opposed to trending south. that ended with the pandemic a couple years ago. as it does, we will see especially interest costs become a weaker problem. they just went over $1 trillion on a yearly basis the government will be paying for, which is more than the defense department. that is not going to get any better because more debt will be rolling off at lower coupons and will be reissued at higher coupons. jonathan: we have been talking about this for the better part of a decade. the day of reckoning, just how far away is it? surely you cannot remain on this trajectory. what is that they reckoning look like? jim: it looks a lot like what you saw in 2022 in the u.k. with

the gilt market and the liability investment problem. when the market decides the day of reckoning is here, when the u.k. put out a budget the market did not like, it forced it to change. the markets will do that, too. if we are going to keep borrowing debt and we will keep spending and will keep running up interest costs, at some point, it is not going to be a commission by the government that will fix it or a change in the leadership in the white house, it is going to be the market that will put its foot down and say, enough, this will stop now, like it did in the u.k. in september of 2022. whether that is next month or 10 years from now, that we can debate, but it will be the market that makes that change. jonathan: the u.k. did not have the luxury of acting recklessly. do you think the u.s. does, to any extent? jim: it has because it is the reserve currency. as long as it is, it is afforded the latitude no other country

is, because everyone else has to own our debt or own our currency, because that is what trade is done in, and that is the dominant currency that runs the world economy. what if he were to lose that status -- to be clear, i do not think we are about to lose that status anytime soon, because there is a lack of an l tentative -- that ultimately -- because there is a lack of an alternative. jonathan: huge numbers. jim bianco of yunker research -- bianco research on the potential of interest rates higher. 4.057% -- how close is that day of reckoning? tom: that is the whole thing, the x axis. bianco has been way ahead of it. the continued call for higher yields really pushes against the disinflation story.

what is so important, and i asked because it is a john riding question, you get higher rates, that is terrible, we will all die -- but bianco was clear, maybe that is a sign of a more resilient u.s. gdp. lisa: it is how they go up. if they go up just a touch because how strong the economy is, that is ok, but if the market puts its foot down, as jim bianco was saying, it brings to mind what james carville said. when he gets reincarnated when he dies, he does not want to come back as a perfect baseball hater, he wants to come back as a bond market. you can intimidate everyone. that is why everyone is watching. jonathan: it was intimidating for about five minutes last year. the month of october. slightly intimidating care then backed away for a couple months. overall, the treasury market bullied everyone, including the

banks. tom: i remember a point where i was stating this was the technical construction of the market in october, and it was grim, grim, grim. a week later, if i had money in play, i would be shellacked. lisa: part of it was the treasury market responding to the bond market. jonathan: if you have money in play, you would be shellacked. lisa: theoretically. jonathan: your equity market is totally unchanged on the s&p 500. from new york city, good morning. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel,

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>> we have been negotiating in good faith all through the holidays on the top line numbers. congress has a responsibility. we have the power of the purse, and we have to be good stewards of precious taxpayer resources.

we cannot continue to borrow money to spend it. reducing non-does -- non-defense discretionary spending has to be a priority of congress. jonathan: that was speaker mike johnson before an announcement of an agreement in congress, easing concerns of a looming government shutdown. your equity market more broadly this morning is totally unchanged on the s&p 500. yields are going nowhere, up by almost one basis point. a real tug-of-war on the front end of the yield curve friday. we talked a lot about that already. page rules -- payrolls growth looks solid, the rest of it, not so much. the two the totally unchanged by the end -- the two year was totally unchanged by the end of trading. tom: take us back. this was 8:30 in the morning. we look at the revisions. and along looks like a genius. then ism comes out, what, 90

minutes later, and it's "oops." jonathan: you have all the sub indexes. close to stagnating in december. that is the overall read. the biggest drop going back to march, so the change was negative. employment, biggest contraction since 2020. the gauge of employment in the low 40's. manufacturing earlier in the week has been in contraction since late 2022. put it all together, not great. but again, we all cautioned the same thing. the quirks of december. tom: this is not michigan confidence. this is countable data. is it like weekly claims? no. i am going to suggest ism is a somewhat countable idea. jonathan: it goes completely against the grain, the headline numbers in payrolls friday, which said everything is ok.

that said something different. tom: the euro unchanged. jonathan: that will destroy the morning, without a doubt. tom: what is in your morning, the u.s. government. we are delighted to have henrietta treyz in studio. we had this peek of the house verbatim of republican cant c anon over decades and decades and decades. i want you to describe the dissension of the gop hope to cut spending nominally or cut spending on an inflation-adjusted real basis. to me, the distinction is in paramount. henrietta: i think what we are looking at, the dissensions and the numbers between the house freedom caucus, the speaker, and the new deal they just reached over the weekend, and what senate appropriators have done is so the minimus, that to call this material deficit reduction is kind of laughable to anyone

who is like jim bianco looking for ernest deficit reduction. that is not what we are talking about here. we will get a deal that basically has flatlined funding. if you add on additional aid ukraine, israel, etc., domestic supplementals, that is $59 billion the white house requested, you're looking at fiscal spending higher. tom: i remember being -- we have been talking about this for decades. the distinction is the cutting of nominal or real spending. the british had an experience of real spending cuts over a zillion years ago. are we really going to do that? henrietta: there is no scenario we do real cuts. the best chance is if, in 2025, you have a split house and house and senate. the only scenario i see that happening is if biden's

president and republicans when the house or senate, and you have a massive tax bill due, and you have a scenario where republicans and democrats are negotiating $2 trillion in tax changes, entitlement discussion, sort of the deficit commission, the supercommittee, that kind of stuff all over again in 2025. but you need to split congress, and not this year. lisa: what you need to understand whether this spending deal is making any progress rather than a nice show of progress that gets completely dashed? henrietta: this time around, republicans are having an even smaller majority. math remains undefeated. . . we are trying to count votes you cannot get there for anything other than a democrat plus publican package, which means you will lose the far right. it is up to speaker johnson does -- to decide whether to barrel ahead. you will get stopgap cr's to fund the government from january 19 to february 2, then we are

doing that into march and again in april. the reality is we do not have a deadline until may 1, so they do not actually have to act until then, and i suspect we will get a number of cr's despite the top line deal. lisa: this is a massively, because we also have the iowa race heating up heading into new hampshire, and there is a real focus on 2024 and the election race. do you think the lloyd austin sitting, where our secretary of defense went is enduring a serious period of time internationally is going to make it into some of the discussion around reelection and platforms and what is going on at some of the top levels? henrietta: it would be political malpractice for any of the republicans not to mention it all day. i imagine trump is excited to be the front runner -- that is my forecast for sure. he will bring it up for the remainder of the year. jonathan: can you help us understand what typically happens when there is a terrorist attack like the one that took place in iran last

wednesday. does the national security council reach out to the pentagon? where i am struggling with this story is they did not find out the defense secretary was missing until thursday, when these big things were happening. it gives me the impression, and i am looking for correction if you have got it, it gives the impression they do not talk to each other either when bad things happen. is there a correction there? henrietta: not only are you not talking, how are you telegraphing your not speaking? how are you not getting updated or not providing a press? release that cures where they all are? apparently they have them all tracked and know them -- know precisely where they are at that senior-level. jonathan: it is quite worrying, isn't it? it is not just a lapse in communication, it makes you think they are not talking to each other. henrietta: it is unfathomable that they are not talking, so there needs to be serious cleanup in aisle 2. the white house needs to step up

the education in this one. jonathan: i am really struggling with this story over the weekend. tom: i think it is indicative of the administration. i think they got a lot, lot to talk about. it is not going away. jonathan: you think there is just too much on their plate? do you agree with that? henrietta: i think it is an indicator of the cavalier attitude they go -- have going into 2025 and the election cycle. if i were to extrapolate, what does this mean for their ability to understand voters? if 70% of americans think that we are in recession, stagnation, or deflation. their messaging team and presti needs to hear that. lisa: what are you looking for in the iowa caucus to understand how republicans are going to shift this forward and who number two will be behind the assumed head, which is donald trump? henrietta: i would love the primary season to be a real

bellwether, but i think any of the candidates not named trump will have to wait until the convention. i do not see an opportunity, aside from some seismic low up for haley that offends all this, but none of the polling is giving us that indication. i suspect we will not have any upset until the convention. jonathan: i want to finish on this, because you kind of alluded to it. do you get the feeling there is some type of institutional arrogance here? the lack of communication. do they need, dare i say, marketing division to come into the white house to figure things out? they always seem completely bemused by the disconnect of where they believe things are and what the electorate believes things are. henrietta: never underestimate a democrat's ability to not send a message. it is permanent. jonathan: what is that about? henrietta: i don't know. jonathan: i just cannot understand it. tom: i do not want to get into

the political debate. that is not our place here at bloomberg. but i will say it is indicative of many things we have seen from this administration. jonathan: let me give you an example -- the last three administrations i've covered whilst being here, every time you get payrolls friday, you get the nic director coming out talking to all the networks about how strong they think payrolls is. this administration handed it over to the labor department. completely different approach. just one of those small examples within the media on the disconnect between the administration and communication. thank you. henrietta treyz of veda partners. this is bloomberg. ♪

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jonathan:jonathan: 60 minutes away from the opening bell. equity futures just about turning positive. the first week of losses going back to october. it has been better than good in this market. we had nine weeks of gains and than a week of losses to kick off 24. can get equity futures, just about positive on the nasdaq 100. the russell just a little bit lower. want to turn to the bond market quickly. we talked about the tug-of-war all morning, the conflicting data. headline payrolls looked strong

friday. then you have this services read where the employment index did not look great. two year finish totally unchanged in friday's session. the next stop for this market is cpi data come out thursday. mike mckee is looking ahead to that and ppi on friday. mike: i own this chair thursday because it is cpi. the rest of the week, it is going to be etf's, bitcoin. so it willn be interesting to see what happenedali -- it will be interesting to see what happens because we have the same situation europe did. it is likely to go up because of base effects. there was negative print in december of last year, which means we will see an increase this time. core is going to go down. which do markets focus on?

the immediate focus in europe was the headline number, but europeans backed off of that. do we get the same kind of analysis? tom: what is the goods-services dynamic now? mike: we saw in the ism report for services that service prices went down. we have seen goods prices going down some, so it appears both are on track to continue falling over a longer period, but we are not there yet. one of the unknowns is what happens with this shipping situation. a number of economists on wall street have dug into it and forecast in the united states almost no impact, about a 10th of a percent because shipping costs are low -- small. it will be more in europe, but

it depends on how long it goes on. >> we get fed speak this week as well which is the reason i found interesting to hear from the dallas fed president. this question around asset purchases and whether they should start to slow or taper quantitative tightening, how much do you expect to hear about that in the next couple of weeks? mike: this is probably the first smoke on the horizon for that. she was head of the system open market at the new york fed. she was in charge of all of that. the question is, when to they get down to what they consider the minimum level of reserves? which will be above a minimum level, so they will have a built in safety pad. then do they start tapering it off? if you do not taper and you are lowering interest rates, you are working against yourself. we will hear more of that.

the big fed speaker this week is john williams. he is vice chair of the open market committee. he is wednesday afternoon, so everybody will try to read into that what the fed is going to do. jonathan: you mentioned sequencing. did you get the impression they are starting to tea that up? mike: the fed staff briefing has to come first. another one probably at the next meeting and you will get more of a discussion about it. they will not come out and say what they are going to do for a while, but maybe toward the end of the first quarter we will see that. lori logan said we are likely to see the same problems we had of a market seizure because they do not know where the ample level is. i have compared it to parallel parking a car in new york city. you get into a small space and

back up until you bump into the car behind you. that is the way. jonathan: maybe that is what mike mckee has been doing. lisa: there are other ways to do it. i am just letting you now. jonathan: thursday, cpi, that is the big datapoint of the week. tom: and we will have a tour of ann arbor, michigan, floats and celebration in michigan. because of that, we were ordered to have a michigan economist with us now. she will be up all night watching a football game as well. for the department of economics at michigan, all that heritage, what does football actually mean? do you ignore it? are you at the 50 yard line for every game? >> they do not let the grad students have good seats. it is michigan. go blue. jonathan: we will see tonight.

thank you for joining. you had a great idea out there that in our hysteria right now of single statistics we have denominator blindness. let's take the national debt, the interest expense of that. we forget how large our economy is or how large the labor force is. how hysterical are we now and do we need to calm down? >> we have needed to calm down for decades. the debt has to be in context not just of gdp. we need to think in terms of wealth, which is multiples of what the debt is and i am a believer that we need to look under the hood at what we are spending our money on. there are good ways to do it and ways that are not as good, maybe high income tax cuts, so that is where we need to have a conversation, not just throwing

around big numbers. jonathan: is the fed throwing around big numbers that you would consider appropriate and rational? claudia: in terms of the debt? jonathan: -- tom: in terms of monetary policy. claudia: the fed is trying to do the impossible right now. they have the eye on the prize. they work through financial markets but they do not care about financial markets. it is about keeping people in jobs. we are on our way, but it will be tough to know when they are there and can say, we can back off. lisa: let's do an anatomy of what happened friday. which data is the truce to you at a time when we got stronger headline number, shows of strength, and signs of weakness,

particularly in services employment? claudia: big picture of friday payrolls was a good day. we are averaging a little under 200,000 jobs in recent months. the labor market is buffering. we have a five percentage point increase. this is a strong labor market. you can do this in almost any month and to say that does not look good. there were some signs to keep an eye on, but this was not a flash of going over the cliff. the unpleasant rate has been under 4% for the longest stretch since the 1960's. that is good. >> what about the services data? came in the most going back to 2020 at the height of the pandemic. does this make you feel like we are at a tipping point, that we are cooling off in a more

material way? claudia: we needed to rebalance. we needed to get to a place that was expansionary but not red-hot. we were coming out of a be -- bad labor market with covid. we need to see things slowing. we want to get to a sustainable place. there are going to be signs -- i take more out of the payrolls data, but we need to look at everything. we have gotten mixed signals from the data so far. tom: so readjust for us now. how many states are in a miserable situation? claudia: i have not looked at every state recently. one that has stood out is california, a good example of how you can have an industry having a tough time. tech is having some tough times, yet we have seen no signs of it

spreading because it is an industry issue, not a broad-based contraction. at the national level, it went back down. so looking good so far. jonathan: i want to weigh in on the politics. when i listen to you talk about the labor market, you offer clarity where clarity can be found. where there is not any, you leave the question open. very intuitive. why do you think this administration is struggling with messaging around what is happening with this economy? claudia: for a long time, democrats have put an emphasis on being the adult in the room. when i saw the jobs number, it is like, come on. let's get excited about this. there is more to do, yet when i look at all that has been accomplished -- we really help people. it is not perfect, but do not hide behind what you have done.

go out and say we did a great job. tom: you have been in the trenches. why can't somebody just come out and say, we understand the agony is out there but this has worked out? versus other countries and continents? claudia: i do not know. across the democratic spectrum, there is so much anger at each other. i have the worst feedback from the far left and the center is not exactly happy with me either. it is strange. i do not know. i hate politics. i do not understand it. i keep doing my work and trying to learn what people are going through. jonathan: and we value your work. fantastic to hear from you. on the data, the labor market, and the struggles of messaging in washington. tom: claudia and others would

aggregate. that is what you do. there are so many parts of american society where you're not going to aggregate. how can you be off of -- optimistic on the economy when you see the bankruptcy vectors out there now? then you have the politics of it. far left and far right. there is a sense out there right now. lisa: they have to get their message together because right now economic data looks good, yet when you look at the polls -- biden is losing on the economy at a time when the economy has expended at the fastest pace in years in the fourth quarter. jonathan: just a massive disconnect between where the ministration thinks things are and how people feel. jonathan: there is a large body that i'm sure is cheering about how good things are but all and all that is relatively narrow or

they do not have the voice and sound box that others have. jonathan: if you are just joining us, looking to the program. going into the opening bell, about 48 minutes away, we are positive by almost 0.1%. later this morning, tech, a conversation about tech stocks. apple having one of the worst weeks it has had going back to september. we got a downgrade, just setting you up for that negativity quite early on. tom: it will be interesting to see what he has to say. have you been to ces? tech extravaganza. they do new stuff. they are going to do the thing where you look around. lisa: the apple phones that fell

out of the plane. one of them survived intact. it fell 16,000 feet. jonathan: if you drop this now five feet it is going to crack. what is that about? lisa: i do not know, but i want to hear more about this phone. jonathan: futures on the s&p just about positive from new york city. this is bloomberg. ♪ hey, brent! if you had to choose, would you watch paint dry or compare benefits plans? compare benefits. gusto makes it easier to find the right plan for my team.

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that keeps the multiple expansion story. jonathan: that was the bullish view on apple and tech more broadly. the equity market had a week of losses, apple responsible for at least some of that after a couple downgrades from two key analysts. to kick off this week, equity futures here positive by 0.04%. lisa: we saw an almost 6% decline in apple over the past week. this is the first week to start the year, amazon down 4.4%. is this an apple issue given people are downgrading how much apple can meet the price to credit ratio versus the slowdown or something else that is broader tech? that is one of the key questions. jonathan: really tough start to the year, two downgrades to

start the week. and rosenblatt securities retaining its neutral rating on the tech giant. we have apple's position as the maker of the world's most -- device. -- important device. let's talk about that. the prospect of sales picking up for the iphone and what has been holding them back over the last year. >> i think we downgraded apple in early august. we currently have a 180 nine dollars price target neutral rating. our concern was you had a combination of growth trajectory across much of the company, including iphone, and high-end

evaluation. that combination was not compelling. the issue with the iphone is the future set innovation and the consumer pocketbook and some question about china. all those things have given us data points that are supportive of the notion for iphone. given that is something like 50% of sales, difficult for that stock to have a lot of excitement if there is not excitement in the iphone. tom: the basic idea is they are running it for profit. they have moved from $.29 on the dollar up to $.33 on the dollar. even if they get sales lassitude, can they maintain margins? barton: the company can maintain margins, but i do not know that

type of story, muted growth, is something that will be compelling. i think it is a great company, a company you could want to own at the appropriate price, but you have to be price sensitive. you cannot buy it at any multiple and you cannot sit back and predict multiple expansion in perpetuity with this type of business as we see it now. tom: when you say a pullback, how much would that be? if you get negative news out of china, is this from 180 down to 160? barton: we would feel more comfortable with a healthy double-digit return to our price target. i have some comfort with their estimates and i believe people have baked in the idea of a

muted iphone. this is a company can own at the right price but it is a mature company price. lisa: is this an apple problem or big tech problem? barton: i think this is more apple. we see a great confluence of things developing, lower interest rates supporting multiples, favoring scarce growth which you have at amazon and there has been a reset in the internet model. people have understood you can run these businesses with better margins. you are seeing explosive margin improvement at amazon and spotify. those are more interesting opportunities. lisa: never thought pinterest and spotify would trump apple. is it negative enough for them

to drop out of the mag seven and be defined by a different narrative? barton: certainly that is a term, i guess. apple is a cpg company, a company that you would like to own at the right price in a certain macroenvironment where perhaps it is defensive if the economy is slowing but you do not need to be overweight apple in every environment. jonathan: i wonder what the appropriate multiple is. you have the iphone, a multiple that looks pretty growthy as the revenue starts to shift toward services. what multiple did you put on that business? barton: it is trading at about 1.4 times the market multiple. a lesser premium is appropriate.

you can give it some premium given the strength of its franchise and brand and durability. iphone is not going away and they have good cash flow. this could be a low to mid 20's multiple, makes more sense to me. jonathan: barton crockett of rosenblatt securities. i do not know what pinterest is. lisa: that's because you are a guy. 15% of the audience is male. jonathan: why is that? lisa: i do not know but i have heard from my friends that there is a good way of designing rooms and parties. i do not know pinterest at all, so i do not know, but that is just the demographics.

jonathan: tom has done some extensive research on this. tom: i interviewed him 10, 12 years ago. i went out for a week and looked at pinterest or whatever. it is as you say. they attract a certain audience. some would say more midwest. it is interesting how each of the social venues -- they have a culture and character. i do not know what to make of what you just said about not caution but just status quo technologically. what is next for apple besides some silly vision thing? jonathan: that conversation we could have had a million times over. even with those things going on.

that was the story of the last 12 months, yet every quarter seems to defy logic. lisa: kind of like a phone falling 16,000 feet and surviving. it has to matter on the upgrading cycle and services. if you look at how much you're are paying for various services -- tom: i have never done that. are you kidding me? why do you need four movies today? lisa: what goes on in your household? tom: i wonder but do not ask too many questions. coming up, stuart kaiser. lisa: that is what he continues to say. i love that. good news is good news. friday, was it good news or bad news?

jonathan: i would be like, how do you read that? she basically said you can always find bad news beneath the surface. that index friday was not great. tom: let's go full-circle to where we were at 6:00 a.m. single-digit, low real gdp. it is not a recession. that is what you get. jonathan: already in the swing of things for 2024. lisa: you are not going to say happy new year? jonathan: i might to the europeans. i have european friends who went back to work today. lisa: and you are saying happy to them. jonathan: my american friends have been going at it since early january. ♪

>> from new york city to our viewers worldwide, i am manus cranny. equities just turning slightly into the green. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg's the open with jonathan ferro. ♪ manus: stocks trying to rebound from their worst week since october.